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Possible potholes in the road to mobile payments?

Those of us in the payments industry talk regularly about the potential of mobile payments and the benefits they could bring.

Laying aside for the moment the fact that I feel, at times, as if we all get so excited about mobile we’ve stopped looking for what comes next, I do think it is worth taking a step back and looking at some of the challenges we might encounter as mobile payments become as commonplace as credit or debit cards.

We hear a lot about the work that the banks and other industry players have to do with their mobile solutions. However, there is another side to that equation – consumers.

We know that consumers are generally positive about the potential of mobile payments, but adoption isn’t as quick as it could be, especially in developed countries.

I think there are two main reasons for this – concerns about the technology, and an understanding of why they really need it, when their current payment methods work just fine.

The answer to both is education – but I think we need different messages to address the two different concerns.

To reassure users about the security of mobile payments, and to set their mind at rest when it comes to fraudulent or incorrect transactions, the banking industry should work together to set the message straight. Consumers need to understand what mobile payment technology is (and isn’t) capable of, and how it can be used.

The recent ‘bad press’ that contactless transactions have received in the UK is an example of how media hype can get out of hand, and a few scaremongers won’t let a good story get in the way of the truth – we can’t let the same thing happen with mobile. (Although this blog does go a long way to correct the myths about contactless flaws.)

When it comes to educating users about the benefits of mobile payments and why they should use them, I think that’s where the retailers come in to the picture. They are the ones who have the potential to really add value to mobile technology, through loyalty schemes, vouchers, ‘favourites’, preferential checkouts for mobile users – the possibilities are endless.

We are seeing some retailers making headway to bring customers on board with their mobile payment technology, normally through an app – take Starbucks and Pizza Express as two good solutions. Starbucks lets users scan a bar code on their phone to pay using stored value, while Pizza Express lets customers pay a bill through their phone using PayPal or a credit/debit card, without waiting for the waiter to return to the table.

I don’t think either of these solutions are necessarily the silver bullet that mobile payments needs to really get customers on board, but they are heading in the right direction. If we in the payments industry want mobile to be the future, we have to start thinking outside the box about what is possible, and makes sure consumers see the value for them.


Comments: (6)

A Finextra member
A Finextra member 21 June, 2013, 16:37Be the first to give this comment the thumbs up 0 likes

Quite right Andy. Mobile payments will finally take off when more effort goes into figuring out what the business problem is it's solving, and how it does so in a way that is sufficiently valuable, useful and simple to adopt that people actually do, than goes into predicting the massive scale of the opportunity. Some further clues here.

Richard Crookston
Richard Crookston - R Crookston - Lampeter 24 June, 2013, 08:26Be the first to give this comment the thumbs up 0 likes

Andy, as I see it there are a couple of significant issues the industry needs to face.  First and one of the biggest potholes that I can think of for mobile payments is the lack of a mobile signal.  Based in the SE of England it's only too easy to think that everywhere has a mobile signal.  Some of us don't have that luxury.  And if a payment system is not ubiquitous then you will have a problem getting it adopted and accepted by the customers.  That's a showstopper. 

On the issue of mobile coverage, are the payments providers in a position to bully the mobile telecoms providers in to truly getting 'universal' coverage?  I think not.  But rural markets are marginalised all the time anyway, so why should this be any different?

And the big question you ask is why should we adopt mobile anyway?  What is in it for me as a cardholder or the merchant?  Is it cheaper?  Is it more secure?  The technology is interesting - to the technology suppliers - but why would I want, or need, to change my current behaviour if I get no benefits?  Today I see no benefit, so why should I adopt a change in behaviour?

Lots of questions and no answers.  To me this will cause a continuing reluctance in the widespread adoption of the technology.  So you are right.  Someone somewhere needs to tell me that I'll save time, money and effort in adopting the technology, if it's available that is.


A Finextra member
A Finextra member 24 June, 2013, 10:19Be the first to give this comment the thumbs up 0 likes

Perhaps the issue is, for countries whose underlying communications infrastructure is based on underground copper wires, a pothole leads to disruption. For societies which have gone directly to mobile, the potholes aren't a problem.

A Finextra member
A Finextra member 25 June, 2013, 09:48Be the first to give this comment the thumbs up 0 likes

Richard, Neil - you both make good points.  In the developing markets that Neil highlights the alternative for most of the population is cash.  So the choice is cash or mobile banking/payments and many people are choosing the mobile option.

In countries like the UK where we already have a wide range of payment choices there is a more difficult proposition.  The key is thinking about the customer - recognising there is not just one type of customer - but also not assuming that because something works well in one geography it should automatically apply somewhere else.

Richard, I understand your frustration with the mobile signal.  I live in SE England in leafy Bucks but in a small village and have very poor mobile reception at home.  No one should assume there is blanket coverage across the UK. 

Mark McMurtrie
Mark McMurtrie - Payments Consultancy Limited - Woking 26 June, 2013, 15:09Be the first to give this comment the thumbs up 0 likes

Mobile payments mean many different things to different people. The same can be said about payments itself.

Mobile does offer new options and opportunities but these have to solve real issues and as mentioned previously be adopted by consumers and retailers.

Infrastructure challenges are just one example. This is why mobile payment solutions are very different in developing economies to mature economies. Think of the success had with MPESA in Kenya.

I am a strong believer that consumers should be offered choice in regards to payments and rather than all payments switching to mobile from cash and cards it becomes just another option.

Retail card payments used to be known by the abbreviation EFTPOS which was meant to stand for Electronic Funds Transfer at the Point of Sale but was known to others as Extremely Fancy Technology for a Perfectly Ordinary Sale. 

We are starting to see the potential for mobile payments, but there remains a long way to go. 

Michael Kyritsis
Michael Kyritsis - ACI - London 27 June, 2013, 16:30Be the first to give this comment the thumbs up 0 likes

Hi Andy, great write-up but what is the business case for the retailers? I agree that they have the capability to "add value to mobile technology, through loyalty schemes, vouchers, ‘favourites’, preferential checkouts for mobile users" but clearly they don't have sufficient motivation.

loyalty schemes / vouchers: you're suggesting that the retailer should fund the mobile technolgoy by offering customers extra incentives. I don't see why a retailer would prefer to have their customer pay with a mobile over another means

'favourites' works only if the retailer provides the app (as is the case with Pizza Express) but I can't see this scaling - will consumers really install a new app for each retailer they shop at? Won't they get annoyed that each app is slightly different?

preferential checkouts: that's a good one. But we already have self-checkout, express check-out, and the normal lanes - which one should be duplicated for mobile (surely not all 3)?  But if you don't do it for all of them your customer would still have to make sure he has his cards at all times.


About network coverage: I'd expect that that mobile payments (unless it's NFC) would require the retailer to provide WIFI

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